📢 CBDT Clarifies on Refund Delays: What Taxpayers Need to Know

 


Income tax refunds are one of the most anticipated outcomes after filing returns. For many taxpayers, refunds represent excess taxes paid through TDS, advance tax, or self-assessment tax. However, in recent months, concerns have emerged regarding delays in processing refunds, leading to speculation that such delays may be intended to encourage taxpayers to shift to the new tax regime.

To address these concerns, the Central Board of Direct Taxes (CBDT) has issued an important clarification: refund delays are not intended to push taxpayers toward the new tax regime. This announcement brings much-needed clarity and reassurance to taxpayers across the country.

In this article, we break down the clarification, understand the reasons behind refund pendency, and outline what taxpayers should do to avoid unnecessary delays.

Understanding the Concern Around Refund Delays

With the introduction of the new tax regime and continued availability of the old regime, taxpayers have had to evaluate which option best suits their financial profile. Amid this transition, some taxpayers noticed delays in receiving refunds, particularly those who opted for the old tax regime.

This led to speculation that refund processing may be slower for old regime taxpayers, indirectly encouraging a shift toward the new regime. The CBDT has categorically denied such claims.

CBDT’s Official Clarification

The CBDT has clearly stated:

  • Refund pendency is not intended to nudge taxpayers toward the new tax regime

  • The majority of pending refund cases relate to the old tax regime

  • Errors in claims were identified under the NUDGE campaign

  • 95% of refunds have already been issued

  • The remaining cases are being processed and will be cleared soon

  • Lower refunds in some cases are due to higher adoption of the new tax regime and TDS rationalisation

This clarification reinforces that refund processing remains system-driven and compliance-based, not regime-based.

Why Are Most Pending Refunds Related to the Old Tax Regime?

The old tax regime allows taxpayers to claim various deductions and exemptions such as:

  • Section 80C investments (LIC, PPF, ELSS, etc.)

  • Section 80D (medical insurance)

  • House rent allowance (HRA)

  • Home loan interest deductions

  • Education loan interest

  • Standard deduction and more

Because the old regime involves multiple claims and documentation, it naturally requires greater validation and verification by the department. Any mismatch between:

  • Form 16

  • Form 26AS

  • Annual Information Statement (AIS)

  • Taxpayer claims

can lead to processing delays.

In contrast, the new tax regime offers lower tax rates but minimal deductions, making return processing comparatively simpler.

Thus, the higher pendency in old regime cases appears to be procedural rather than policy-driven.

What Is the NUDGE Campaign?

The CBDT’s NUDGE campaign is a compliance initiative aimed at improving voluntary compliance and reducing incorrect claims.

Under this campaign:

  • Taxpayers were alerted about discrepancies

  • Incorrect or inflated deductions were flagged

  • Mismatches in income reporting were identified

  • Claims not supported by available data were highlighted

The objective was not to penalise honest taxpayers but to promote accurate filing and prevent revenue leakage.

Where claims were flagged, refund processing may have been paused until clarifications were provided or corrections were made.

95% Refunds Already Issued – What Does It Mean?

The CBDT has confirmed that 95% of refunds have already been processed and issued. This indicates that the overall system is functioning efficiently.

The remaining 5% likely involves:

  • Cases under verification

  • Returns with mismatched data

  • High-value deduction claims requiring scrutiny

  • Bank account validation issues

  • PAN-Aadhaar linking problems

  • Technical or procedural compliance gaps

Taxpayers falling under this category are advised to check their e-filing portal regularly for notices or action items.

Why Are Some Refunds Lower This Year?

Another key point clarified by the CBDT is that in some cases, refunds may be lower due to:

1️⃣ Higher Adoption of the New Tax Regime

The new regime has become the default regime in recent years. Since it allows fewer deductions, the tax computation differs from the old regime. Many salaried individuals may not have adjusted their tax planning accordingly, leading to different refund outcomes.

2️⃣ TDS Rationalisation

The government has undertaken measures to rationalise TDS rates across various categories. Better alignment between actual tax liability and TDS deductions means excess tax payment may be lower than before—resulting in smaller refunds.

A lower refund does not necessarily indicate an error. It may simply reflect more accurate tax deduction during the financial year.

Common Reasons for Refund Delays

While the CBDT has clarified policy concerns, individual refund delays may still occur due to:

  • Mismatch between Form 26AS and ITR

  • Incorrect bank account details

  • Failure to pre-validate bank account

  • Unverified ITR

  • Incorrect deduction claims

  • Pending responses to notices

  • AIS mismatch

  • High-risk refund cases selected for verification

Understanding these reasons can help taxpayers proactively avoid delays.

How to Avoid Refund Delays

Here are practical steps taxpayers should follow:

✅ 1. Reconcile All Tax Statements

Before filing, cross-check:

  • Form 16

  • Form 26AS

  • AIS (Annual Information Statement)

  • TIS (Taxpayer Information Summary)

✅ 2. Ensure Accurate Deduction Claims

Claim deductions only if:

  • You have valid proof

  • They match employer reporting

  • They align with AIS data

✅ 3. Verify Your Return Promptly

ITR verification is mandatory. Use:

  • Aadhaar OTP

  • Net banking

  • Digital signature

  • EVC

Unverified returns will not be processed.

✅ 4. Pre-Validate Bank Account

Ensure your bank account:

  • Is linked to PAN

  • Is pre-validated on the e-filing portal

  • Is enabled for refund credit

✅ 5. Respond to Notices Immediately

If the department raises a query, respond within the specified timeline to avoid prolonged delay.

Old vs New Tax Regime – Should Refund Be a Deciding Factor?

Refund amount alone should not determine whether you choose the old or new tax regime.

Instead, evaluate:

  • Total tax liability under both regimes

  • Eligibility for deductions

  • Investment profile

  • Housing loan commitments

  • Medical insurance coverage

  • Long-term tax planning goals

Each taxpayer’s situation is unique. Professional guidance can help you choose the most beneficial option.

Transparency in Tax Administration

The CBDT’s clarification demonstrates a commitment to transparency. By addressing speculation directly, the department has reassured taxpayers that:

  • Refund processing remains neutral

  • No regime is being favoured

  • Compliance accuracy is the key driver

  • Pending refunds will be cleared systematically

This communication strengthens trust between taxpayers and the tax administration.

Final Thoughts

Refund delays can understandably cause anxiety, but the CBDT’s clarification provides clarity:

✔ Refund delays are not linked to pushing taxpayers toward the new regime
✔ Most pending cases relate to old regime claim verification
✔ 95% of refunds have already been issued
✔ Remaining refunds are under process
✔ Lower refunds may be due to rationalised TDS and new regime adoption

The takeaway for taxpayers is simple: file accurately, reconcile data carefully, and respond promptly to notices.

Tax compliance today is increasingly data-driven and automated. Accuracy, transparency, and timely action are the best safeguards against refund delays.

If you are facing refund issues or need guidance on choosing between the old and new tax regime, professional assistance can make the process smooth and stress-free.

📞 Contact us today: +91 7305701454
📧 Email: auditsiva2@gmail.com
🌐 Website: www.taxlaservices.com

#IncomeTaxUpdate #CBDTClarification #TaxRefund #NewTaxRegime #OldTaxRegime #TaxCompliance #TaxlaServices #BestAuditorInTamilnadu

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